Russia has overtaken Saudi Arabia as China’s top oil supplier, and imports are at an all-time high. Trade between the two countries is also becoming more intense at the moment.
Chinese imports of Russian oil hit a new high last month. In May, China imported 9.71 million tons of oil from Russia, according to Chinese customs data. This corresponds to an increase of more than 32.4 percent compared to April.
“The private Chinese refineries have resorted to a considerable extent to the significantly cheaper crude oil from Russia,” explains Carsten Fritsch, a commodity expert at Commerzbank. According to Fritsch, Russia has replaced Saudi Arabia as China’s most important oil supplier. India has also become a major buyer of Russian oil.
More oil for less money
According to data from the International Energy Agency (IEA), however, the revenues that Russia generates from the sale of the oil are falling. According to this, Russia made a total of $13.3 billion in oil sales last May. According to the IEA monthly report, that is $1.4 billion less than in April.
Compared to the previous year, this corresponds to a decrease of 36 percent – in May 2022 the proceeds were still 20.9 billion dollars. According to the IEA, China and India accounted for more than half of all Russian deliveries.
Growing trade between China and Russia
Western countries have criticized China’s partnership with Russia, but trade between China and Russia is also growing steadily apart from oil supplies. Last year, the trade volume between the two countries reached a new record of 190 billion dollars. According to current information, the flow of goods reached a value of 20.5 billion dollars in May alone.
At a meeting in March, heads of state Xi Jinping and Vladimir Putin agreed to bring the trade volume to $200 billion by 2023. A large part of Russian deliveries is likely to consist of raw materials. For comparison: According to the Federal Statistical Office, the mutual exchange of goods between Germany and China reached almost 299 billion euros last year.
Russian economy is holding up better than expected
Despite the sanctions, the Russian economy is doing better than previously expected, according to a forecast by the European rating agency Scope. Gross domestic product (GDP) is likely to shrink by just 0.8 percent this year, according to the new economic forecast from which the news agency said Reuters quoted. So far, the analysts had assumed a slump of 4.0 percent, after a minus of 2.1 percent in 2022. Growth is expected for the coming year, but this should be moderate at 0.9 percent.
“The Russian economy will shrink again in 2023, albeit not as much as last year due to cheap energy prices and higher government spending,” write Scope analysts Jakob Suwalski and Brian Marly. “But the high budget deficits point to challenges ahead as the war in Ukraine and sanctions take their toll.”
However, Asian economic powers such as China and India would open up alternative trade routes and markets to Russia. This weakens the consequences of the Western sanctions imposed because of the Ukraine war and supports the economy.